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Incentivizing Interchangeability: Does the Biologics Price Competition and Innovation Act Incentivize the Development of Interchangeable Biosimilars?

By Ted Little*

In January of 2017, the FDA published its first draft guidance on the considerations involved in demonstrating interchangeability. Based on this draft and  he FDA’s finalized guidance on the considerations of approval of interchangeable biosimilars will likely not create incentive structures that compel biosimilars manufacturers to seek an interchangeability designation.

In 2010, as part of a suite of legislation accompanying the Affordable Care Act, Congress enacted the Biologics Price Competition and Innovation Act (“BPCIA”).[i] The BCPIA creates an two-tier abbreviated path to market for follow-on biologic therapies.[ii] Follow-on biologics may receive approval as either “biosimilar” or “interchangeable” with respect to a reference product.[iii] As yet few drugs have been licensed through the BPCIA. As of September 2017, only seven products have received biosimilar designation and none have received interchangeable designation.[iv]

The chief advantage of an interchangeability designation over a biosimilar designation is that interchangeable biosimilars may be substituted for name-brand biologics by the patient without a physician’s prescription. An interchangeable biosimilar is more readily accessible to patients.

Overview and Aims of the BCPIA

Biologics are pharmaceutical therapies composed of complex combinations of biological molecules, including proteins, nucleic acids, and sugars.[v] Unlike normal small-molecule drugs, which normally consist of fewer than 50 atoms straightforwardly bound in a largely two-dimensional structure, a biologic often involves complex three dimensional structures and a variety of chemical bonding interactions.[vi]

In 1984, the Hatch-Waxman Act provided an abbreviated path to approval for small-molecule generics, allowing, for instance, licensure of generic acetaminophen as a follow-on to Tylenol. The BPCIA seeks to provide a similar abbreviated pathway for follow-on biologic therapies. The BPCIA creates two abbreviated paths for biologic product approval; under the BPCIA, a product may be approved as “biosimilar” or “interchangeable” with respect to a reference product (i.e. the original biologic).[vii]

To show that a product is “biosimilar” the applicant must show that the product is “highly similar” to the reference product and that there is no “clinically significant” difference between the two products.[viii] The applicant must provide evidence that the two products utilize the same mechanism of action and is active under the same prescribing circumstances (e.g. dosage, method of administration, etc.).[ix]

Interchangeability has a higher standard. In order to be interchangeable, a product must first meet the requirements for biosimilarity, and then the sponsor must further show that the product is “expected to produce the same result in any given patient” and that switching between the product and the reference product is not more dangerous than using either product without switching.[x] An interchangeability determination would allow the patient-consumer to switch between a reference product and an interchangeable product at the pharmacy without consulting the prescribing physician.

 Incentives to Pursue Interchangeability

The FDA has not released a finalized version of its draft guidance on considerations in achieving an interchangeability designation. However, in its draft guidance, the FDA indicated that it will expect applicants to conduct a “switching study”.[xi] A switching study is a type of clinical trial in which patients alternate between treatment regimens of the biosimilar seeking interchangeability designation and the reference product.[xii] These studies are intended to assess the safety of switching back and forth between the biosimilar and the reference product.[xiii] Though the draft guidance does not specify how many switching studies are needed to demonstrate interchangeability, it is likely that a biosimilar’s path to interchangeability will be costly.

Market Exclusivity and Perceived Safety of Interchangeable Biosimilars

The BPCIA has a built-in incentive for biosimilar manufacturers to seek an interchangeability designation. The first interchangeable biosimilar for any reference product receives one year of market exclusivity against all other interchangeable biosimilars.[xiv] However, this exclusivity is limited to interchangeable biosimilars. Non-interchangeable biosimilars may remain on the market during this period. Thus, it is likely that an interchangeable biosimilar will have to compete with non-interchangeable biosimilars even after bearing the cost of interchangeability approval.[xv]

Some analysts have argued that an interchangeability designation will lead prescribers and patients to believe that an interchangeable biosimilar is necessarily more safe than a non-interchangeable biosimilar.[xvi] They argue further that such a perception of safety will give interchangeable biosimilars a market advantage over non-interchangeable biosimilars.[xvii] On this view, the perception of safety that accompanies an interchangeability designation gives weight to the market exclusivity that the BPCIA affords.

Whether or not such a perception exists or might exist is an open question, though some survey data does support this position.[xviii] However, even if such a perception exists it would likely not affect consumer uptake, given the payment structure of the American health care system.[xix] Given the high cost of biologic therapies in general, payers (e.g. Medicare, health care insurance companies) are incentivized to cover only those therapies that are cheapest if the clinical considerations are identical;[xx] and by definition all biosimilars (interchangeable and non-interchangeable) are clinically identical to the reference product.

This scheme likely leaves manufacturers who seek an interchangeability designation without a means of recouping the costs of attaining interchangeability. Manufacturers may try to sell their interchangeable biosimilars at an increased cost to recover their expenses, but they risk being dropped from insurers coverage plans. Alternatively, they can price their interchangeable biosimilars competitively in the hope that the perceived safety of interchangeable drugs increases their market share with respect to their non-interchangeable competitors. However, such a hope relies on patient-consumers and prescribers opting for interchangeable drugs irrespective of the cost regime imposed by their insurer. Given that insurer’s financial incentives effectively compel consumers to accept low-cost generic small molecule drugs over their brand name counter-parts,[xxi] we should not expect that consumer preference for interchangeability alone will allow biosimilars manufacturers to recover the cost of attaining interchangeability.

 The Naming Non-factor

In addition to its draft guidance on interchangeability, in January of 2017, the FDA issued a guidance laying out procedures for naming biosimilars and their reference products. Neither of these documents provides any direction as to how interchangeable biosimilars’ non-proprietary names will differ from the reference product’s, if at all.

However, comments submitted to the draft of FDA’s naming guidance indicate consensus among industry players that biosimilars should retain their non-proprietary name, even if they should subsequently attain interchangeability status.[xxii] Any other naming regime would likely produce confusion on the parts of prescribers, consumers, and distributors.[xxiii]

The FDA’s finalized biologics naming guidance provides that all biosimilar biologics are given their non-proprietary name by adding a four-letter suffix to the reference product’s non-proprietary name.[xxiv] This suffix serves to distinguish the biosimilar product from the reference product.

As such, even drugs that do attain interchangeability will likely not be able to market themselves as chemically identical to the reference product.


Though it is impossible at this time to do a precise cost benefit analysis until the finalized guidance on interchangeability is released, given the miniscule benefits that biosimilars manufacturers stand to gain from an interchangeability designation, it is likely that few manufacturers will seek such a designation.

* Ted Little is a Junior Editor on MJEAL. He can be reached at

The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.
[i] U.S. Food & Drug Admin., Biosimilars: Questions and Answers Regarding the Implementation of the Biologics Price Competition and Innovation Act of 2009 Guidance for Industry (2015).

[ii] Hannah Koyfman, Biosimilarity and Interchangeability in the Biologics Price Competition and Innovation Act of 2009 and FDA’s 2012 Draft Guidance for Industry, 32 Biotech. L. Rep. 238, 238 (2013).

[iii] Id.

[iv] Ctr. for Drug Evaluation & Research, List of Licensed Biological Products with (1) Reference Product Exclusivity and (2) Biosimilarity or Interchangeability Evaluations to Date, U.S. Food & Drug Admin. (last visited Nov. 30, 2017).

[v] What Are “Biologics” Questions and Answers, U.S. Food & Drug Admin. (last visited Nov. 30, 2017).

[vi] Koyfman, supra note 2, at 238.

[vii] Id.

[viii] 42 USC § 262(k)(2)(A) (2010).

[ix] 42 USC § 262(k)(2)(A)(i) (2010).

[x] 42 USC § 262(k)(4) (2010).

[xi] U.S. Food & Drug Admin., Considerations in Demonstrating Interchangeability with a Reference Product: Draft Guidance for Industry (2017).

[xii] Id.

[xiii] Id.

[xiv] 42 USC § 262(k)(6) (2010).

[xv] Joseph P. Fuhr, et al., Product naming, pricing, and uptake of biosimilars, 4 Generics & Biosimilars Initiative J. 64 (2015),

[xvi] Zachary Brennan, Biosimilar Interchangeability: ‘Careful What You Wish For’, Regulatory Affairs Prof’l Society (Sept. 8, 2016),

[xvii] Id.

[xviii] Fuhr, supra note 13.

[xix] Id.

[xx] Id.

[xxi] Id.

[xxii] Jacob F. Siegel & Irena Royzman, Naming of Interchangeable and Biosimilar Biologics Likely to be Same, Biologics Blog (Nov. 23, 2015),

[xxiii] Id.

[xxiv] U.S. Food & Drug Admin., Nonproprietary Naming of Biological Products: Guidance for Industry (2017).

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